MOSCOW, November 18 (Sputnik) â€” American producers of shale oil are planning to further boost extraction despite the ongoing slump in global prices, triggering the OPEC nationsâ€™ plan to cut exports in order to help prices recover, while Russia may face fiscal difficulties.
Several major US oil-producing enterprises including Oklahoma-based Devon Energy, Continental Resources and Texan company EOG Resources have announced plans to boost oil production in their most lucrative oil fields, while lowering extraction from their least profitable assets, as reported by Bloomberg. This means that US oil production in the short-to-medium-term will continuously increase, contributing to the ongoing slump in global prices.

Such a decision has exacerbated concern from the OPEC oil-producing syndicate, formally led by US key ally Saudi Arabia. The gravest disturbance was expressed yesterday by Venezuelan President Nicolas Maduro in a televised address, as reported by CNBC, who said he was calling on fellow OPEC members and non-OPEC oil producers to hold multilateral discussions regarding the possibility of cutting extraction in order to push oil prices up. The next OPEC meeting is to be conducted in Vienna on November 27, but Maduro said he is offering an additional discussion prior to the event.

This coincided with Venezuelan FM Rafael Ramirezâ€™s tour of oil-producing nations, including Russia and the Gulf states.

â€œThereâ€™s a lot more production coming online this year and in the first half of 2015,â€ Jason Wangler of Houston, TX-based Wunderlich Securities Inc. said of the US oil extraction situation, as quoted by Bloomberg. â€œThis isnâ€™t a machine that you can turn on and off with a switch. Itâ€™s going to take months, if not quarters, to turn it around.â€

US domestic oil production exceeded 9 mln barrels per day (bpd) in the first week of November for the first time since 1983, according to data by the US Energy Information Administration.

The Venezuelan initiative is unlikely of gain traction from OPEC due to Saudi resistance. As oil prices fall further, nations that ship oil by tankers find themselves in tough competition for their share of the shrinking oil market. Chinaâ€™s economy is slowing and therefore demands less oil. Near-zero growth in Europe and the EUâ€™s initiative to decrease dependence on fossil fuels have undermined Europeâ€™s oil consumption, while Japan, now technically in recession, requires less oil not only due to economic turmoil, but also thanks to its gradual return to nuclear energy.

Now, the one who first cuts production will lose their precious share of the scarce market.

â€œWeâ€™re in a battle with Saudi Arabia with regard to market share versus U.S. shale oil,â€ Scott Sheffield of Pioneer Natural Resources said as quoted by Bloomberg.

While Saudi Arabia is acting as a more solid market participant, the situation within the US is even more complicated because different oil-extracting companies have to compete against one another, which forces them to drill more wells, pump quicker and deliver faster. US oil production is skyrocketing exponentially for this reason.

â€œAny company that comes out and says weâ€™re cutting growth is going to get hit,â€ said Wangler, a Wunderlich Securities analyst. â€œItâ€™s not a fun spot to be in. Do you do what makes sense for the oil market, or do you do what makes sense to investors?â€

Another factor affecting oil prices is Iran. The deadline for a nuclear deal is set on November 24, and in case the last round of negotiations is a success, international sanctions will gradually be relieved, meaning Iran will supply even more oil to the global market against ever-shrinking demand. However, analysts at Citi say OPEC export cuts are more likely than an Iranian nuclear deal at this point. But next weekâ€™s outcome may prove them wrong.

This de facto debt rescheduling tells us several important things. First, it is another confirmation of Venezuelaâ€™s economic and financial distress. To service its Chinese debts at lower oil prices, Venezuela would have had to export comparably more oil. But the country cannot increase oil output quickly. Nor does it have the financial wherewithal to service its Chinese debts in cash instead; foreign reserves are already under pressure. So something else had to be done.

Second, China apparently agreed to the debt rescheduling perhaps because its banks believed in taking the long view. After all, Venezuela has the worldâ€™s largest oil reserves â€“ so one day it will pay. But was the rescheduling Chinaâ€™s preferred choice? As the old saying goes: if you owe the bank $5, you have a problem, but if you owe the bank $5m, the bank has a problem. Either way, China is unlikely to be a source of fresh finance for Venezuela from now on.

Price below $80 have effected most of oil producing nations,leaving perhaps UAE , Qatar. For Iran anything below $100 would be in deficit and effect it's total revenue same is the case of russia ,soth American countries & SA. US seems to have played its game well,with japan being recession and europe's growth remain almost stagnant US seems to be the only one growing at 3.5% this Q,a furture fall in price for an already ailing russian economy which grew at 0.7% this Q ,would for sure send it into recession.
Whatever they are upto, non oil producing countries have a great time to make billions of dollars out of it,it will help bring drown India's CAD,bringing down the inflation furture. Early rate cuts and some majore reforms could be icing on the cake.

resechudiling is in long term interest of China,which such heavy reserves you don't need to think about returns so early,for now its all about investing in S.America heavly and taking most of the market share away from the US,which seems to be happening.

Strategic petroleum reserves is the crude oil inventories (or stockpiles) held by a nation to ward off any internatiional energy crisis.

China's government-controlled reserves are being completed in three phases. Phase one consisted of a 101,900,000 barrels (16,200,000 m3) reserve, mostly completed by the end of 2008. The second phase of the government-controlled reserves with an additional 170,000,000 barrels (27,000,000 m3) will be completed by 2011. Recently, Zhang Guobao the head of the National Energy Administration also stated that there will be a third phase that will expand reserves by 204,000,000 barrels (32,400,000 m3) with the goal of increasing China's SPR to 90 days of supply by 2020.Global strategic petroleum reserves - Wikipedia, the free encyclopedia

This competition will be a boon for China to fulfil its Strategic Petroleum Reserve target.

No, Russia did not dump US bonds. It's US treasuries holdings is so huge that it cannot escape the attention of traders and economists should it dump it.

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Don't know how anyone would know who dumped it, because the bonds are anonymous. In any case, I don't understand why gold prices have fallen, given that oil prices are also falling. The Swiss are going to hold a referendum on how much bullion to hold, and they are considering raising their stockpile.

Don't know how anyone would know who dumped it, because the bonds are anonymous. In any case, I don't understand why gold prices have fallen, given that oil prices are also falling. The Swiss are going to hold a referendum on how much bullion to hold, and they are considering raising their stockpile.

â€œIf China is to get more serious about specifying and enacting climate goals, Beijing will need to prosecute its energy needs in a way that begins to build up a set of domestic interests for clean energy, similar to what CNOOC and Chinaâ€™s other major energy firms already represent on the oil and gas side,â€

The number of supertankers sailing to China jumped to a record in ship-tracking data amid signs that the oil-price crash is spurring the Asian nation to stockpile.

There were 83 very large crude carriers bound for Chinese ports, according to shipping signals from IHS Maritime compiled by Bloomberg at about 8:30 a.m. today in London. The ships would transport 166 million barrels, assuming standard cargoes, the largest number in data starting in October 2011. The cost of hiring the vessels surged to the highest in almost five years, according to Baltic Exchange data.

The International Energy Agency, a Paris-based adviser to 29 nations, said in a report today that China may have added to strategic crude stockpiles last month, after pausing the activity in October. Oil plunged into a bear market this year, with Saudi Arabia and other nations in the Organization of Petroleum Exporting Countries offering few signs they will tackle a global glut.

â€œWe see cargoes being picked up to be put into storage in China predominantly,â€ Erik Folkeson, a shipping analyst at Stockholm-based Swedbank AB, said by phone today. â€œThe steep reduction in crude prices and continued output of crude has, in my view, triggered stock building.â€

Daily shipping rates on the tanker industryâ€™s benchmark trade route from the Middle East to Asia jumped to $83,605 today, the highest since January 2010, Baltic Exchange data show. Swaps on the route, used for hedging freight costs, indicate daily earnings this month will average $77,964.
Strategic Reserves

Crude slumped in London and New York today after the IEA cut global demand estimates for 2015, citing weakening economies in Russia and other producer nations. Brent slid as much as 3.7 percent to $61.35 a barrel on the ICE Futures Europe Exchange. West Texas Intermediate slid as much as 4.4 percent on the New York Mercantile Exchange. Both are down about 40 percent this year.

â€œAs the price declined it made sense to buy,â€ Court Smith, head of research at Stamford, Connecticut-based shipbroker MJLF, said by phone yesterday.

China has to buy at least another 50 million barrels of crude in 2015 for its strategic petroleum reserve, according to Amrita Sen, chief oil market analyst at Energy Aspects Ltd., a London-based consultant. Plans to expand commercial crude inventories could raise that total above 100 million barrels, depending how quickly the country can build new storage units, she said.

â€œChina filling up big parts of its SPR essentially helps to absorb the oversupplyâ€ on international oil markets, Sen said by telephone today. â€œYouâ€™re not going to get China slowing down on filling before 2016.â€
West Africa

Part of the tanker freight-rate rally may be because of rising shipments from West Africa. Traders booked 33 cargoes of crude on VLCCs from the region this month, 43 percent more than a year earlier, according to data from Galbraithâ€™s Ltd., a London-based shipbroker.

Angola and Nigeria, the regionâ€™s two biggest exporters, will ship 4 million barrels a day next month, the most since August 2012, loading programs obtained by Bloomberg show.

The cost of shipping crude to China from West Africa was $3.34 a barrel yesterday compared with an average of $2.52 this year, according to data compiled by Bloomberg.

An excess of VLCCs in the Persian Gulf shrank in the past several weeks, with 11 percent more of the ships available than cargoes, down from an average surplus this year of 17 percent, according to a Bloomberg survey of shipbrokers and owners.
Fleet Growth

â€œFleet growth is slowing, meaning that every additional barrel of oil on the water will help to tighten the market,â€ said Swedbankâ€™s Folkeson.

The crude tanker fleet grew 1.5 percent this year compared with trade growth of 1.8 percent, according to Folkeson. Seaborne oil trade will rise by 3.5 percent in 2015, against no change in the fleet, he said.

VLCC rates will rise to an average of $35,000 a day in 2015, compared with $25,851 this year, according to a median of six forecasts from shipping analysts compiled by Bloomberg.

The 83 ships en route to China compares with 67 on average this year and 68 on Dec. 13 last year.

To enhance its energy security, China has been pressing forward with its Strategic Petroleum Reserve (SPR) plans amid its feverish race to secure oil and gas deals worldwide. In July, the countryâ€™s state-run Sinochem Corp. started expanding a facility that will become the countryâ€™s largest strategic oil reserve site. The site on Aoshan island, just off the manufacturing hub of Zhejiang province in east China, will eventually hold 50 million barrels, or roughly ten days of Chinaâ€™s current rate of net crude imports, after adding a 19-million-barrel farm to its existing 31-million-barrel base.

This news follows China National Petroleum Corporationâ€™s (CNPC) March disclosure that it had started construction on a SPR facility in Jinzhou City. Both projects are part of eight facilities planned for Chinaâ€™s Strategic Petroleum Reserve Phase Two (SPR II). The Jinzhou site it expected to begin operations by 2015. It is expected to store 3 million cubic meters (18.9 million barrels) of oil, and will cost Chinese Yuan 2.26 billion ($357.4 million), according to Xinhua News Agency.

How this will play out in international oil markets and even geo-politically is already being seen. While itâ€™s no secret that oil price increases in the last ten years are partly due to increased Chinese demand, Chinaâ€™s filling of its oil reserve facilities will take that to the next level, making China an oil shaker and mover on par with the United States. In fact the US, who can influence the price of oil with releases from its massive 700 million barrel reserves, will have even stiffer competition from China who is projected to have 500 million barrels once it completes its SPR facilities by 2020. By then, the worldâ€™s number one and number two oil importers will have over a billion barrels of oil in reserve. Added to the mix is a January disclosure by Goldman Sachs that within a year and a half China is due to overtake the US to become the worldâ€s biggest oil importer. This will be a milestone in energy geopolitics.

Recently, OPEC acknowledged Chinaâ€™s growing muscle in international oil markets. Earlier this month the cartel said at a meeting in Vienna that Chinese oil consumption, when compared with developed economies, is changing the global demand structure. OPEC said that emerging and developing countries like India and China represented 42 percent of the global economic growth by the start of the last decade. These same economies however are expected to contribute 76 percent of this yearâ€™s 3.3 percent global economic growth forecast. The cartel added that â€œChina alone has doubled its oil consumption over the past 12 years and that oil prices have become increasingly sensitive to the economic conditions in these dynamic regions, particularly China.â€

According to the International Energy Agency (IEA), Chinaâ€™s oil demand in 2009 averaged around 8 million barrels per day, rising rapidly from 4.6 in 2000, increasing by a compound average growth rate of 6.7%. Overall demand is expected to continue along this gradual increasing trend and by 2020 Chinaâ€™s primary oil demand is projected to rise to 12.2 and almost 15 million barrels per day by 2035. Of course these are just projections. If Chinaâ€™s economy stalls they may not be met. However if the economy keeps growing (a more likely scenario) or even accelerates, China could blow these figures away.

Chinaâ€™s crude imports rose 11% in Q1 over the same period last year, a much stronger pace than full year 2011â€™s increase of 6%, Chinaâ€™s General Administration of Customs reported.

With sanctions against Iran causing a geopolitical headache for Chinaâ€™s oil and gas ambitions and last yearâ€™s Arab Spring volatility, which has yet to run its course as the drama in Syria unfolds and Egyptâ€™s new government takes control, one doesnâ€™t have to wonder why China presses through with its oil reserve plans.

China is highly dependent on the Middle East for its crude, which accounted for more than 50% of its total crude imports in 2011, followed by Africa at 24%. By country, China imported 20% of its crude from Saudi Arabia, Angola (12%), Iran (11%), Oman (7%), Russia (7%), Sudan (5%) and Iraq (5%).

Strategic Petroleum Reserve phases

Chinaâ€™s SPR plan was conceived in 2001 during the countryâ€™s Tenth Five-Year plan (2001-2005) in order to prevent and mitigate damage caused by oil supply disruptions. Chinaâ€™s SPR is to be built in three phases. Phase one construction was completed in 2008 and included four stockpiling facilities with a total capacity of 103.2 million barrels. They were filled with crude by the end of 2010.

Phase two is currently under construction and comprises eight storage sites forecasted at a combined capacity of 207 million barrels. Construction is scheduled to be completed by 2013. The Dushanzi and Lanzhou sites (both with 18.9 million barrels capacity) were completed in the last half of 2011. Reuters reported in March that an estimated 17 million barrels of crude oil, about 190,000 barrels a day, have flowed into tanks in Dushanzi and Lanzhou.

The Tianjin site (22 million barrels) is set for completion this year. Once all eight-phase SPR II storage facilities come online they will have a total capacity of 206.9 million barrels.

Phase three is forecast for a total capacity of over 180 million barrels, which will boost total reserves to 500 million barrels by 2020.

Filling the reserve tanks

Industry experts state that filling of the additional SPR-II facilities could start as soon as they are completed, depending on crude oil prices. However, in February Xinhua reported that high oil prices slowed Chinaâ€™s filling of strategic petroleum reserves. Yet that was on February 21 when oil was $106.25 a barrel. Prices then bottomed out below $90 a barrel in late May, reaching a seven-month low. Prices have gained momentum again and by last week bounced back to $97.26 per barrel.

Zhou Xiujie, an analyst with the China Investment Consulting Corp. told Xinhua that the best time to increase oil reserves is undoubtedly when prices are low, but itâ€s hard to judge oil price trends.

Lin Boqiang, director of the China Center for Energy Economics at Xiamen University negated the influence of oil prices in relation to filling the SPR.

â€œGenerally speaking, oil prices will head upwards anyway. Therefore, the earlier the oil is purchased, the better,â€ he said.

Zhou Dadi, a researcher at the Energy Research Institute under the National Development and Reform Commission, Chinaâ€™s top economic planner, said China has room to increase its oil reserves, but should balance the cost of maintaining the reserves with its actual needs.

â€œTheoretically, the more oil held in reserve, the better, as sufficient oil stocks will help ensure energy security,â€ Zhou said. He added that it takes money to do that, so oil reserve plans should be made in line with the countryâ€™s energy needs.

Chris Faulkner, CEO, of Breitling Oil and Gas, also commented on the price of oil and the filling of Chinaâ€™s reserve facilities.

â€œThey [China] are certainly on an oil buying spree and the increase in their demand is what has been running oil prices back up from their low in May,â€ Faulkner told Energy Tribune on Tuesday.

â€œKeep in mind May deliveries were booked in March so China has been planning this buying spree for some time,â€ he added.

â€œTotal crude supplied to China, which is a blend of their domestic production plus their import numbers, exceeded the amount processed by Chinese refineries by just over 1 million barrels per day in May 2012,â€ Faulkner said. â€œThis clearly illustrates they are pouring oil in their strategic storage.â€
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The US and the West wanting to make Russia bleed over Ukraine, has actually cut its nose to spite its face.

By manipulating the oil prices to hit the rock bottom through the pliant surrogate Saudi Arabia and OPEC, it sure has hit Russia hard.

But then, what is Russia compared to China when it comes to the bitter struggle to find the top dog space in global supremacy.

Russia is no match. But then the Anglo Saxon biases cannot be wished away and so the West and the US have to take on Russia and crush its nose in the dust.

From the ego standpoint it is a great achievement, but sadly for the West, it has given rise to a Frankenstein that will bite it in the posterior and make it jump and bleed that no medication or surgery can save!